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ACCA Strategic Professional · Strategic Business Leader · Reporting to stakeholders

Veltra plc, a listed manufacturer, publishes an annual report in which the chair's statement says the board 'complies fully with the governance code'. Investors complain that they cannot tell how the board actually applied the code's principles in practice. Which reporting approach would best address this concern?

The best approach is to explain how each governance principle was applied, including the outcomes, instead of merely asserting compliance. Principles-based reporting aims to show real practice to investors, and a checklist, removal from the annual report, or reporting only departures would not give that understanding.

  1. AReplace the narrative with a tick-box checklist of code provisions
  2. BExplain how each principle was applied, with outcomes, rather than only asserting complianceCorrect
  3. CMove governance disclosures to the company website and remove them from the annual report
  4. DReport only the provisions where the company has departed from the code

Explanation

Principles-based codes expect companies to describe how principles were applied and the outcomes achieved, giving stakeholders insight into real practice. A checklist or a bare assertion of compliance gives no insight. Reporting only departures omits how the principles were applied, so it is incomplete.

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